Traders (Forex, stocks, commodities etc') may now rely on automatic tools (“algo-trading”). In electronic financial markets, algorithmic trading or automated trading, also known as “algo-trading”, “black-box trading” or “robo-trading”, is the use of computer programs for generating and executing trading orders, with the computer algorithm deciding on aspects of the order such as the timing, price, or quantity of the order, or in many cases initiating the order without human intervention. The investment decision and implementation may be augmented at any stage with algorithmic support or may operate completely automatically (“on auto-pilot”).
A considerable amount of financial trading is now performed via the Internet, using one of many trading websites to facilitate trading. It has been suggested to data-mine the trading transactions performed via such websites, in order to detect market trends and to allow a novice trader to follow such trends.
Similarly, software has been developed that rates the trading success of individual traders, and upon detection of a “master trader” ranked with a high financial success rate, the software allows other traders to automatically copy future trades performed by such “master traders”. While some websites maintain the anonymity of the master trader, others allow such master traders to expose their identity and, for instance, chat with other traders online.
The inventors have developed one such social trading website which allows users to follow trades performed by other users, and allows users to view ranking of “master traders”. This website has the URL: http://openbook.etoro.com.
Once a user has requested to automatically copy a “master trader”, the software will blindly follow any trading actions taken by the master trader.
The disadvantage of such automatic copying of a “master trader” lies in human fallacy, namely, even though a specific master trader has been ranked as being successful over a given amount of time, this does not ensure that he will notice sudden or subtle changes in market trends. A master trader may, for instance, be out for a weeklong illness during which he performs no trades, and his automatic “blind followers” may lose significant sums if the market takes a sudden turn.
The need exists for trading software that allows detection of “master traders”, allowing others to follow their trading transactions only in such cases where these trades are predicted to be profitable. The need exists for software that analyzes trades performed by master traders, and algorithmically checks whether the market conditions support this trade. In such cases where the algorithms suggest otherwise, the software will override the “automatic” following of the master-trader and will instruct the novice trader to disregard the master-trader's transaction. Additionally, the need exists for software that utilizes data mining to detect market trends unnoticed by a predefined master trader, and that informs a trader that trades should be performed that the master trader has overlooked.